Hyderabad-based startup Lotusdew is making money for investors

Hyderabad-based startup Lotusdew Wealth and Investment Advisors has been leveraging cutting-edge technologies like artificial intelligence and machine learning (AI/ML) to identify small- and micro-cap stocks in the Indian equity market. In a conversation with Business Today, Abhishek Banerjee, the Founder and CEO of Lotusdew Wealth and Investment Advisors, shared insights into their strategies that have delivered impressive 30-50 percent compounded annual growth rate (CAGR) returns since inception.

Q: Could you provide details on your stock selection process?

A: Lotusdew specializes in small- and micro-cap stocks and uses a top-down macro approach for portfolio construction and risk management. Our focus is on the smallest companies, with an emphasis on the quality of the board that governs the organization's ethical standards and the quality of the management that drives earnings. We employ AI/ML tools to process and organize data from various public sources, allowing us to measure factors upstream before they reflect in balance sheets, giving us an edge in the market.

Q: How many funds or schemes are currently available through Lotusdew?

A: We offer a range of strategies, from nano-cap stocks with market caps ranging between Rs 200-500 crore to multi-cap portfolios. Our strategies, such as Nano-cap Champ and Listed Venture Capital, assess listed companies based on factors like credibility, associations with previous institutions, private holdings, gender diversity, board independence, tax litigation history, and earnings quality. Our various strategies, including High Frequency and Value Momentum, cater to different investment preferences and have delivered strong CAGR returns, with High Frequency and Listed Venture Capital achieving over 50 percent CAGR.

Q: What is the cost structure for your services?

A: We charge a fixed fee of around Rs 1,500 per month for each strategy. Our fee structure isn't based on assets under management (AUM), so clients pay a fixed fee to access advice across their entire portfolio.

Q: How do you assess the future of the Indian equity markets?

A: India's equity markets are still evolving, which means limited access to various sectors as a pure play. For instance, pure-play space companies are rare in the listed space. Thus, investors need to diversify their exposure through financials, as it's a more established segment of the market. Financials are often considered value plays, although their balance sheets can be complex. Given improvements in non-performing assets (NPA) management, the Insolvency and Bankruptcy Code (IBC) process, and benign inflation, financials are expected to remain strong, provided investors choose the right stocks among the listed business models.